What is Net Profit

by Investing School on November 17, 2009

When working in business, one must keep track of many numbers. Whether one is selling products, goods or services or charging fees for the use of assets, he must keep a running total of the monies that come in from the sale or use of all these business activities. Failing to do so can result in business failure, and could even result in legal action.

After you total all of the income received from your business activities then you have a gross profit number. Once you take this number and subtract overhead, interest, etc. then you have net profit.

Another term used in finance and business for net profit is bottom line. This term originated from the look of the income statements which detailed all of the allocated revenues and expenses or a quarter or specific period of time. The number on the bottom line of the report would indicate the net profit for that time period.

In even simpler terms, net profit is the money that is left over after a company has taken care of other expenses related to the business. This can actually get quite complicated because a bookkeeper or accountant must list all of the revenues and expenses correctly in order to get an accurate number for a company’s Net Profit.

The Net Profit can differ depending on where you do business. In the US, Net Profit is the result or profit after taxes. These numbers would be shown on a company’s profit and loss statement.

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